Carbon disclosure, carbon performance and corporate governance: Empirical evidence from Asia-Pacific non-financial firms : A thesis submitted in partial fulfilment of the requirements for the Degree of Doctor of Philosophy at Lincoln University

Abstract

Climate change and global warming have become pressing issues that have gained attention from both academia and society, leading to an increased interest in climate change-related concerns. One initial measure towards mitigating climate change concerns and lowering a company's carbon footprint is greenhouse gas emissions measurement and voluntary carbon disclosure to investors. As the interest in carbon disclosure and its financial consequences is growing, this study aims to investigate the nexus between the extent of carbon disclosures, carbon performance and financial outcomes in Asia Pacific non-financial firms during from 2016-2021. Though studies on voluntary disclosure and carbon performance are emerging, a comprehensive understanding of their nexus, governance-related factors and financial consequences at the firm level is lacking. Prior studies on the financial consequences of integrating proactive carbon disclosure lack consensus and remain inconclusive on the direction of this relationship. By using comparable data from the Carbon Disclosure Project (CDP) from 2016 to 2021, this study provides a comprehensive examination through three individual, but related, essays. The first essay explores the relationship between carbon disclosure, carbon emissions and the cost of debt financing. Using a simultaneous equation model to address potential endogeneity concerns, the findings reveal that firms with lower carbon emissions are more likely to engage in higher levels of voluntary carbon disclosure and such disclosures are associated with a reduced cost of debt. Additionally, carbon disclosure in the previous year is negatively associated with carbon emissions in the following year, suggesting that firms may strategically signal future emission risks to manage potential shareholder litigation and regulatory penalties. These findings highlight the financial benefits of carbon transparency for firms and underline the need for policymakers to strengthen mandatory disclosure requirements to mitigate potential window-dressing behaviour. The second essay investigates how corporate governance structures influence the level of carbon disclosures. In addition to traditional governance factors, this study incorporates climate governance elements to offer a more comprehensive analysis. The results demonstrate that board independence and gender diversity positively affect the comprehensiveness of carbon disclosure, but CEO duality is associated with lower disclosure levels. Climate governance measures, such as the presence of a sustainability committee, climate risk awareness and ESG-related incentives, significantly promote transparency. The influence of governance mechanisms is more pronounced among firms in carbon- intensive sectors, firms listed on foreign exchanges and those operating under civil law systems. These findings offer practical implications for regulators and firms aiming to enhance sustainability practices through a better governance framework. The third essay examines the effect of firm-level exposure to climate change risks and opportunities for firm value, emphasizing the moderating role of carbon transparency. The findings indicate that higher climate change exposure leads to a decline in firm value, particularly through exposure to regulatory shocks and emerging climate opportunities. However, firms with greater carbon transparency are able to mitigate this negative effect, especially in environments characterized by weaker institutional quality. This suggests that transparent climate-related disclosure can serve as a strategic tool for maintaining firm value in the face of climate-related risks. Overall, this thesis contributes to the growing body of research on carbon disclosure and its financial consequences by providing evidence from the Asia-Pacific context. It offers important insights for corporate managers, investors and policymakers, emphasizing the critical role of disclosure quality, governance structure and institutional environment.